Q. I was offered VERA at office. I would like to accept, but have a TSP loan balance for a home loan that won’t get paid by the 90-day deadline. My retirement is set for July 2020. When I separate and still have outstanding balance, how will I get taxed and at what percentage rate? I was not due to retire until May 2027. Also, will it affect annuity payments, and how long do I have to pay the loan back?
A. Any unpaid balance will be declared a taxable distribution and added to your tax return for that year as ordinary income. The tax you’ll owe will depend upon your tax return and whether, or not, the distribution is subject to the early withdrawal penalty. You have 90 days from the date that your agency reports your separation to the TSP to repay your loan.
